Review

1
Review

1. What is the fundamental economic problem?
2. What are the fundamental questions in economics?
3. What is opportunity cost?
4. What are the four factors of production?
5. What is a synonym for factors of production?
6. What is a corporation?
7. What two types of costs make up total cost?
8. What is the goal of all firms?
9. What is the equation for profit?
10. Define GDP.

2
Review

1. What are the keys to capitalism?
2. Law of Demand A decrease in ______________would
   cause an increase in quantity demanded?
3. What type of business organization has limited
   liability?
4. What is entrepreneurship?
5. Minimum wage is an example of a price _________.
   This type of government interference in the
   market causes a _____________.
6. Market clearing price is another term for
   ___________.

3
Why is it bad to store your savings under your
mattress?
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Inflation

• Prices just keep on Rising

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How much does it cost???????
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How much does it cost??????
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How much does it cost???????
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How much does it cost?????
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What is it?????????????

• Inflation is when prices increase over time
• Deflation is when prices decrease over time
• 1-2 is acceptable
• Creeping, Galloping, Hyper are unacceptable
• Inflation is measured by Price Indexes

http//www.youtube.com/watch?v3w0KMC1Ticcfeature
related
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Hyper Inflation
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Price Indexes

• CPI- The consumer price index. Measures the
  change in prices of consumer goods in various
  categories.
• PPI- The producer price index. Measures the
  change in prices of capital goods and raw
  materials.
• GDP Deflator- The most comprehensive price index
  a combination of the CPI and the PPI. Measures
  the change in the price of over 40,000 products.

http//www.youtube.com/watch?vhnCYtx3frRA
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Price indexes

• Measure the price change in a market basket of
  goods.
• What is in the CPI?
• FOOD AND BEVERAGES (breakfast cereal, milk,
  coffee, chicken, wine, full service meals,
  snacks)
• HOUSING (rent of primary residence, owners'
  equivalent rent, fuel oil, bedroom furniture)
• APPAREL (men's shirts and sweaters, women's
  dresses, jewelry)
• TRANSPORTATION (new vehicles, airline fares,
  gasoline, motor vehicle insurance)
• MEDICAL CARE (prescription drugs and medical
  supplies, physicians' services, eyeglasses and
  eye care, hospital services)
• RECREATION (televisions, toys, pets and pet
  products, sports equipment, admissions)
• EDUCATION AND COMMUNICATION (college tuition,
  postage, telephone services, computer software
  and accessories)
• OTHER GOODS AND SERVICES (tobacco and smoking
  products, haircuts and other personal services,
  funeral expenses).

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What is this cartoon saying?
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Inflation Summary Vid

• http//www.youtube.com/watch?vSmOMp8gycMAfeature
  related

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Review

1. What is the term for rising prices?
2. Explain the three price indexes and how they
   measure inflation.
3. EOCT REVIEW
4. What is the law of supply?
5. What is the law of demand?
6. Give me one inelastic good why?
7. Give me one elastic good why?
8. What is the profit maximizing point of output?

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Example
(CY/BY) x 100
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Calculate the Price index

• Using year 1 as the base year, what is CPI in
  years 1, 2, and 3?
• What was the rate of inflation over the base year
  in years 2 and 3?

18
Was Babe Ruths salary good compared to todays
players?

• Babes 1931 salary - 81,000
• CPI 1931 15.2
• CPI 2005 195

Amount in todays s (P level today/P level in
year T) 81,000
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Why is understanding inflation important?
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CPI for food
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CPI for Medical Care
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CPI for Housing
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Review

1. What is the term for rising prices over time?
2. What do we call falling prices over time?
3. CPI, PPI or GDP Deflator?
4. Measures the prices of inputs such as raw
   materials and capital equipment
5. Measures goods and services included in GDP
6. Measures the prices of goods purchased by
   households
7. If CPI in 2012 is 130 compared to the base year,
   what is the rate of inflation?
8. If CPI in 2012 is 90 compared to the base year,
   what happened to prices in the economy?
9. What is the difference between real and nominal
   GDP?

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What causes inflation?

• ?

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What causes inflation??

• Demand-Pull Inflation buy more than the economy
  can produce

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What causes inflation??

• Cost-Push Inflation rising costs

EXAMPLES????
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Other causes

1. Demand pull
2. Cost push what is an example?
3. Government Deficits
4. Increase in money supply

http//www.youtube.com/watch?va863JOfrbS8feature
related
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2012 CPI 5 1913 CPI 100
If you took 1 from 1913 and flew in a time
machine to 2012, how much would that 1 be worth?
CPI 2012/CPI 1913 1 5/100 .05 1 .05
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What would be an action by a countrys government
to help them get out of debt?
Who would this upset? Is this a form of taxation?
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Inflation.Good???? Bad????

• Helped by Inflation

• Hurt by Inflation

• -Borrowers with fixed interest payments
• -Government (borrower) in debt

• -Banks/lenders with fixed rate loans
• - People living on fixed incomes

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What is a
Deficit?
What do you think the U.S. deficit is?
A deficit is when spending is greater than
revenue (taxes)during a period of one year.
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(No Transcript)
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What is a
Debt?
Debt is the accumulation of deficits
http//www.usdebtclock.org/
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What does a deficit and debt look like?
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(No Transcript)
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10,000
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1,000,000 can be stuffed in a grocery bag.
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100 million can fit on a pallet
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1 Billion
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1 Trillion DOUBLE STACKED
Projected 2010 deficit is 1.7 trillion
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1 trillion of 1 stacked one on top of each
other reaches 68,000 miles into space or 1/3 the
distance to the moon.
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To put things in perspective, current estimates
put the number of stars in the Milky Way at
somewhere between 100 and 400 billion.